Consumption and Work Effort over the Lifecycle
The presence of a hump shaped lifetime consumption profile is a well known puzzle from the perspective of a lifecycle model with complete marketsâ€”why donâ€™t individuals simply smooth consumption over the length of their life? Recent literature that addresses this question [e.g. Carroll (1997) and Gourinchas and Parker (2002)] has emphasized the importance of precautionary saving in the face of income uncertainty. In addition to this, FernÃ¡ndez-Villarverde and Kruger (2001) have argued the importance of accumulation of consumer durables early in life. In this paper, we use a calibrated version of a standard general equilibrium lifecycle model to demonstrate the importance of uncertainty in the length of life, and the absence of a complete set of annuity markets, in generating lifecycle consumption profiles similar to ones estimated from data. Individuals in our model face no income uncertainty. Our model is one in which individuals hold assets that are claims to capital used in production. In addition, a workerâ€™s productivity depends on his/her age, and individuals, who value leisure, will vary their work effort over their life in response to this. This turns out to have some secondary importance for the shape of the consumption profile. We also consider whether introducing old age transfer programs, such as a pay-as-you-go social security system, mitigate the consequences of a lack of annuity markets. Preliminary results indicate that they have relatively little effect.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||2004|
|Date of revision:|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:red:sed004:816. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.